835.10/4–2050

Memorandum by the Economic and Finance Adviser of the Bureau of Inter-American Affairs ( White )

confidential

Subject: Proposed Line to be Taken by ARA in Discussions with Argentine Mission and with American Foreign Power and American Petroleum Companies.

1.
Argentine Mission should be told the following:
a.
Department analysis Argentine financial data and projection balance of payments indicates that solution will be difficult because of magnitude projected dollar deficit 1950–52.
b.
Proposed solutions American Foreign Power and importation dollar oil would appear to place strain on dollar position additional to that indicated original balance of payments project.
c.
Eximbank analysis and discussions still in progress.
d.
Question of additional dollar commitments obviously closely related to repayment prospects on Eximbank credits and also closely related to magnitude of Eximbank credits.
e.
It is believed therefore Argentine Mission may want to defer definite commitment new dollar obligations until course of Eximbank credit discussions can be firmed up.
2.
American Foreign Power should be informed as follows:
a.
Analysis Argentine financial data, available for first time, indicates that basic dollar situation over period of next several years will be a difficult one.
b.
It is believed that any substantial dollar commitments over and above those previously projected by the Argentine Government might so seriously impair repayment prospects as to jeopardize Eximbank credits.
c.
Failure of Eximbank negotiations would, in the Department’s judgment, result in complete collapse U.S. business position in Argentina.
d.
Conclusion reached from foregoing is that any settlement American Foreign Power’s problem involving substantial dollar outlay in [Page 710] next several years is impossible. Department is however prepared to give full diplomatic support approach upon the following lines:
(1)
Agreed plan for the liquidation of arrears on earnings.
(2)
Agreement under which American Foreign Power would either retain present operations with rate schedule permitting reasonable return or reinvestment program with adequate safeguards.
(3)
Prompt transfer of earnings under (2) above.
3.
Any program involving large and continued expenditure of dollars for the importation into Argentina of petroleum is impossible for reasons outlined above. Department is prepared to give full diplomatic support however to any plan which will meet American petroleum companies legitimate interests without requiring large dollar outlay. Such a plan might include:
a.
Short-term arrangement, say six months, for importation of dollar crude needed to resume normal refining and market activities.
b.
Negotiation of a tri-partite agreement among British, Argentine and American oil companies under which basic requirements of crude for American companies would be obtained for payment in sterling.
c.
Long-time marketing agreement under which American companies would receive equitable share of import and marketing participation.
d.
Agreed plan between oil companies and Argentine Government for liquidation of arrears in earnings and of future earnings in Argentina.